KSK GROUP BERHAD (FORMERLY KNOWN AS KURNIA ASIA BERHAD) ("KSK" OR THE"COMPANY")

Transcription

1 KSK GROUP BERHAD (FORMERLY KNOWN AS KURNIA ASIA BERHAD) ("KSK" OR THE"COMPANY") PROPOSED SELECTIVE CAPITAL REDUCTION AND REPAYMENT EXERCISE UNDER SECTION 64 OF THE COMPANIES ACT, 1965 INVOLVING KSK ("PROPOSED SCR") 1. INTRODUCTION The Company had on 27 March 2013, announced that it had on even date received a letter from Tan Sri Dato' Paduka Kua Sian Kooi ("Offeror"), being the major shareholder of KSK, requesting for the Company to undertake a selective capital reduction and repayment exercise pursuant to Section 64 of the Companies Act, 1965 ("Act") ("Offer Letter"). Details of the Offeror and the persons acting in concert with him ("PACs") (collectively referred to as the "Non-Entitled Shareholders") are set out in Section 2.3 of this announcement. On behalf of the Board of Directors of KSK (save for the Interested Directors as set out in Section 6 of this announcement) ("Board"), OSK Investment Bank Berhad ("OSK") wishes to announce that the Board had, at a meeting held on 9 April 2013, deliberated on the Offer Letter and has decided to present the Proposed SCR to the shareholders of KSK for their consideration. Details of the Proposed SCR are set out in the ensuing sections. 2. DETAILS OF THE PROPOSED SCR 2.1 The Proposed SCR The Proposed SCR involves KSK undertaking a selective capital reduction and repayment exercise under Section 64 of the Act to all shareholders of KSK other than the Non-Entitled Shareholders, whose names appear in the Record of Depositors of KSK as at the close of business on an entitlement date to be determined at a later date ("Entitlement Date") ("Entitled Shareholders"). Pursuant to the Proposed SCR, the Entitled Shareholders will receive a total capital repayment of RM412,919,569 which represents a proposed cash amount of RM0.65 per ordinary share of RM0.25 each in KSK ("KSK Share(s)" or "Share(s)") held ("Proposed Cash Amount"). The Non-Entitled Shareholders will waive their entitlement to the repayment of capital pursuant to the Proposed SCR. The basis of the Proposed Cash Amount is set out in Section 2.2 of this announcement. As at 26 March 2013, being the last trading day prior to the serving of the Offer Letter ("LTD"), KSK has an issued and paid-up share capital of RM375,000,000 comprising 1,500,000,000 KSK Shares. As at the LTD, the Offeror holds 765,646,824 KSK Shares, representing approximately 51.04% equity interest in KSK, while the PACs hold in aggregate 99,092,300 KSK Shares, representing approximately 6.61% equity interest in KSK. The issued and paid-up share capital of KSK will be reduced by way of cancellation of KSK Shares held by the Entitled Shareholders. Accordingly, 1,651,678,278 KSK Shares shall be cancelled pursuant to the Proposed SCR. Given that the number of KSK Shares to be cancelled is higher than the existing issued and paid-up share capital of KSK as at the LTD, a bonus issue of up to 152,678,278 new KSK Shares ("Bonus Share(s)") will be undertaken by KSK to increase the issued and paid-up share capital of KSK up to a level which is sufficient for the capital reduction ("Proposed Bonus Issue"). In such event, all KSK Shares which are then in issue, including the Bonus Shares, will be cancelled, save for the 1,000,000 KSK Shares which will then be held by the Non-Entitled Shareholders. Upon completion of the Proposed SCR, the Non-Entitled Shareholders will collectively hold 100% of the equity interest in KSK. 1

2 The Non-Entitled Shareholders do not intend to maintain the listing status of KSK on the Main Market of Bursa Malaysia Securities Berhad ("Bursa Securities") and will make an application to Bursa Securities to de-list the entire issued and paid-up share capital of KSK from the official list of Bursa Securities upon completion of the Proposed SCR. The Proposed SCR will be funded by way of internally generated funds of KSK. 2.2 Basis of the Proposed Cash Amount The Proposed Cash Amount was arrived at after taking into consideration, amongst others, the following:- i. KSK had on 26 September 2012 completed the disposal of its core business, namely 100% equity interest in Kurnia Insurans (Malaysia) Berhad ("KIMB") to AmG Insurance Berhad ("AmG") ("Disposal"). Upon completion of the Disposal, the main assets remaining in the Company are the net proceeds arising from the Disposal, a leasehold property acquired through the utilisation of proceeds and the Company's investment in its subsidiary company in Indonesia and associate company in Thailand which are involved in the business of underwriting general insurance. The Proposed Cash Amount was arrived at based on the unaudited net assets ("NA") of KSK and its subsidiaries ("KSK Group" or "Group") as at 31 December 2012 after adjusting for an amount of RM175 million which are held under escrow accounts pursuant to the agreed terms of the Disposal, details of which are set out below:- RM'000 Unaudited NA of KSK Group as at 31 December ,170,789 Amount held under escrow with an escrow agent pursuant to the Disposal (75,000) Amount held under escrow with an escrow agent pursuant to a reinsurance agreement *2 (100,000) Unaudited adjusted NA 995,789 Unaudited adjusted NA per KSK Share RM0.66 Notes:- An amount of RM75 million has been retained with an escrow agent to meet certain potential liabilities of KSK including the warranties as agreed between KSK and AmG pursuant to the Disposal. Such amount shall be retained for a period of up to thirty (30) months from the completion date of the Disposal of 26 September 2012 (although up to RM25 million may be released 18 months from the completion date). There is no certainty that this amount of RM75 million will be sufficient to meet all the potential liabilities of KSK under the Disposal in respect of the warranties and other obligations of KSK, and the limit to the amount of claims that AmG may claim against KSK for certain warranties could be higher than RM75 million. *2 Pursuant to the Disposal, KSK and AmG had jointly appointed an independent actuary to determine the net outstanding claims liabilities of KIMB as at 30 June Based on the independent actuary's determination, KSK has set aside an amount of RM100 million with an escrow agent for a period of six (6) years from 1 July Such amount will be used to meet any potential claims losses made by KIMB under a reinsurance agreement entered into between KIMB and a reinsurer as part of the terms of the Disposal. There is no certainty that KIMB will not claim against this amount. 2

3 The Proposed Cash Amount represents a discount of approximately 1.52% to the unaudited adjusted NA per KSK Share as at 31 December 2012 of RM0.66. ii. The last transacted price of KSK Shares as at the LTD, the five (5)-day, one (1)-month, three (3)-month, six (6)-month, one (1)-year and three (3)-year volume weighted average market price ( VWAP ) of KSK Shares up to and including the LTD as set out below:- KSK Share price Proposed Cash Amount Premium of the Proposed Cash Amount to the prevailing market price RM RM RM % Last transacted price as at the LTD Five (5)-day VWAP up to One (1)-month VWAP up to Three (3)-month VWAP up to Six (6)-month VWAP up to One (1)-year VWAP up to Three (3)-year VWAP up to (Source: Bloomberg) 2.3 Non-Entitled Shareholders The Offeror and his shareholding in KSK as at the LTD are set out below:- < Direct > < Indirect > Offeror No. of Shares % No. of Shares % Tan Sri Dato' Paduka Kua Sian Kooi 765,646, ,000, Note:- Deemed interested by virtue of the shareholding of his spouse, Puan Sri Siew Toh Ee The PACs and their respective shareholdings in KSK as at the LTD are set out below:- < Direct > < Indirect > PACs No. of Shares % No. of Shares % Puan Sri Siew Toh Ee 5,000, Datuk Kua Chung Sen 12,702, ,000, Dato' Quah Teong Moo 17,867, C S Kua Sdn Bhd 60,000, Kua Pek Suan 3,523,

4 < Direct > < Indirect > PACs No. of Shares % No. of Shares % Kua Ying-Fei Note:- Deemed interested by virtue of his substantial shareholding in C S Kua Sdn Bhd 2.4 Salient terms of the Offer Letter The salient terms of the Offer Letter include, amongst others:- i. If KSK declares, makes and/ or pays any dividend and/ or other distribution of any form or nature whatsoever (collectively referred to as "Distribution") after the date of the Offer Letter up to the completion of the Proposed SCR, the Proposed Cash Amount shall be reduced by an amount equivalent to the net dividend and/ or other Distributions per KSK Share; ii. From the date of the Offer Letter until the completion of the Proposed SCR, KSK shall undertake that:- (a) (b) (c) (d) Save for the funding to be raised for the purpose of the Proposed SCR, if any, KSK will not conduct any form of capital raising exercise, whether in the form of debt or equity and will not grant any options over KSK Shares or issue any new KSK Shares; KSK Group will not enter into any material commitment or material contract or undertake any obligation or acquire or dispose of any of its assets or create a security interest over any of its assets outside the ordinary course of business; KSK will not pass any resolution in general meeting (other than in respect of any ordinary business tabled in an annual general meeting or pursuant to Section 5 of this announcement) or make any alteration to the provisions of the memorandum and articles of association of KSK or any of its subsidiaries, save to comply with the relevant regulations, if any; and/ or KSK shall not enter into any discussion or negotiation, or agreement, with any other party with respect to the sale of the assets and liabilities of KSK or any privatisation proposal involving KSK or any of its subsidiaries, without the Offeror's prior written consent; iii. iv. KSK will not do or cause, or allow to be done or omitted, any act or thing which would result (or be likely to result) in a breach of any lawful obligation of KSK or any of its subsidiaries; and KSK also undertakes that, as from the date of the Offer Letter until the completion of the Proposed SCR, it (and it shall use reasonable endeavours to cause and procure that each subsidiary of KSK) shall carry on its business only in the usual, regular and ordinary course in substantially the same manner as the same is carried on as of the date of the Offer Letter so as to preserve its relationships with all parties to the end that its goodwill and going concern shall not be materially impaired at the completion of the Proposed SCR, save as otherwise agreed in writing by the Offeror. 4

5 3. RATIONALE FOR THE PROPOSED SCR KSK had on 4 October 2012 announced that it has been classified as a cash company under Practice Note 16 of the Main Market Listing Requirements of Bursa Securities ("Cash Company") subsequent to the Disposal. As a Cash Company, KSK must submit a regularisation plan to acquire a new core business to the Securities Commission Malaysia ("SC") for its approval within 12 months from 4 October However, as at the date of the Offer Letter, KSK has yet to identify any viable new core business. Further, the existing operations in Thailand and Indonesia may not be able to provide any dividend stream to KSK in the medium term as the companies are required to maintain regulatory capital pursuant to the respective regulatory requirements in Thailand and Indonesia. During this period, additional capital injection may also be required to finance the business growth of the insurance businesses in Thailand and Indonesia. In initiating the Proposed SCR, the Offeror has also taken into cognisance the longer than expected gestation period of the existing operations in Thailand and Indonesia. As such, the Offeror, after taking into consideration the investment preference of the shareholders of KSK, has decided to privatise KSK via the Proposed SCR. This will then enable the Entitled Shareholders to reinvest the capital repayment received pursuant to the Proposed SCR as they see fit. The Proposed SCR provides an opportunity for the shareholders of KSK (save for the Non- Entitled Shareholders) to exit the Company and realise their investments at a premium to the prevailing market price as illustrated in Section 2.2(ii) of this announcement. 4. EFFECTS OF THE PROPOSED SCR The effects of the Proposed SCR are set out below:- 4.1 Issued and paid-up share capital The proforma effects of the Proposed SCR on the issued and paid-up share capital of KSK are set out below:- No. of Shares RM Issued and paid-up share capital as at the LTD 1,500,000, ,000,000 Shares to be issued pursuant to the Proposed Bonus Issue 152,678,278 38,169,569 1,652,678, ,169,569 Shares to be cancelled pursuant to the Proposed SCR (1,651,678,278) (412,919,569) The resultant issued and paid-up share capital 1,000, ,000 Note:- The Proposed Bonus Issue shall be undertaken only to facilitate the implementation of the Proposed SCR. Shares issued pursuant to the Proposed Bonus Issue will eventually be cancelled upon the completion of the Proposed SCR and hence, no Shares will be credited into the central depository system accounts of the Entitled Shareholders 5

6 4.2 NA per Share and gearing Based on the unaudited consolidated statements of financial position of KSK Group as at 31 December 2012, the proforma effects of the Proposed SCR on the NA per Share and gearing of KSK Group are set out below:- Unaudited as at 31 December 2012 RM'000 After the Proposed SCR RM'000 Share capital 375, Share premium 7,652 - Translation reserve (88) (88) Fair value reserve 4 4 Revaluation reserve - - Retained earnings 788, ,403 *2 Shareholders' equity/ NA 1,170, ,569 No. of Shares in issue ('000) 1,500,000 1,000 NA per Share (RM) Borrowings (RM'000) - - Gearing (Times) - - Notes:- *2 After the capitalisation of approximately RM7.65 million pursuant to the Proposed Bonus Issue After the capitalisation for the balance of approximately RM30.52 million pursuant to the Proposed Bonus Issue and deducting estimated expenses of RM1.30 million in relation to the Proposed SCR 4.3 Earnings and earnings per Share ("EPS") The Proposed SCR will be effected via a reduction in the share capital of KSK and hence is not expected to have any material effect on the earnings of KSK Group for the financial year ending 31 December 2013 save for the estimated expenses of RM1.30 million to be incurred in relation to the Proposed SCR. 4.4 Substantial shareholders' shareholdings Upon completion of the Proposed SCR, KSK will be 100% owned by the Non-Entitled Shareholders as a result of the cancellation of all KSK Shares owned by the Entitled Shareholders. 4.5 Convertible securities As at the LTD, the Company does not have any existing convertible securities. 6

7 5. APPROVALS REQUIRED The Proposed SCR is subject to the following being obtained:- i. The approval of the SC for a proposed exemption under Practice Note 44 of the Malaysian Code on Take-Overs and Mergers, 2010 and its consent for the contents of the circular, explanatory statement and independent advice letter pursuant to the Proposed SCR; ii. iii. iv. The approval of Bursa Securities for the contents and the issuance of the circular pursuant to the Proposed SCR; The approval of the shareholders of KSK for the Proposed SCR via a special resolution at an extraordinary general meeting ("EGM") of the Company to be convened; The approval and/ or consent of the existing financiers and/ or creditors of KSK and/ or its subsidiaries, if required; v. The grant of an order of the High Court of Malaya confirming the Proposed SCR; and vi. Any other relevant authorities or parties, if required. The Proposed SCR will become effective on the date the sealed order of the High Court of Malaya is filed with the Companies Commission of Malaysia. 6. DIRECTORS' AND MAJOR SHAREHOLDERS' INTERESTS Save as disclosed below, to the best of knowledge of the Board, there are no other directors, major shareholders and/ or persons connected to them who are interested in the Proposed SCR:- 6.1 Interested directors The Offeror is a director of KSK and is deemed interested in the Proposed SCR. In addition, certain PACs, namely Datuk Kua Chung Sen, Dato' Quah Teong Moo and Kua Ying-Fei are also directors of KSK. Accordingly, the Offeror, Datuk Kua Chung Sen, Dato' Quah Teong Moo and Kua Ying-Fei (collectively referred to as the "Interested Directors") have abstained and will continue to abstain from deliberating and voting on the Proposed SCR at the relevant board meetings of KSK pertaining to the Proposed SCR and other resolutions, if any, which facilitate the implementation of the Proposed SCR. The Interested Directors will also abstain from voting in respect of their direct and/ or indirect interests in KSK on the resolution pertaining to the Proposed SCR at an EGM of the Company to be convened. The Interested Directors will ensure that persons connected to them, if any, will abstain from voting in respect of their direct and/ or indirect shareholdings in KSK, if any, on the resolution pertaining to the Proposed SCR at an EGM of the Company to be convened. 6.2 Interested major shareholders The Offeror is a major shareholder of KSK and is deemed interested in the Proposed SCR ("Interested Major Shareholder"). The Interested Major Shareholder will abstain from voting in respect of his direct and/ or indirect interests in KSK on the resolution pertaining to the Proposed SCR at an EGM of the Company to be convened. The Interested Major Shareholder will also ensure that persons connected to him, if any, will abstain from voting in respect of their direct and/ or indirect shareholdings in KSK, if any, on the resolution pertaining to the Proposed SCR at an EGM of the Company to be convened. 7

8 7. ADVISER AND INDEPENDENT ADVISER The Board has appointed OSK Investment Bank Berhad as the Principal Adviser for the Proposed SCR. Newfields Advisors Sdn Bhd has been appointed by the Offeror to advise the Offeror on all relevant matters pertaining to the Proposed SCR. The Board, save for the Interested Directors, has appointed M&A Securities Sdn Bhd ("M&A Securities") as the Independent Adviser to advise the Entitled Shareholders and the noninterested directors of KSK on the merits and on the terms of the Proposed SCR and whether the Proposed SCR is fair and reasonable to the Entitled Shareholders. 8. DIRECTORS' STATEMENT The Board, save for the Interested Directors, had on a meeting held on 9 April 2013 deliberated on the Offer Letter and has decided to present the Proposed SCR to the shareholders of KSK for their consideration at the EGM of the Company to be convened. 9. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances and subject to all relevant approvals being obtained, the Proposed SCR is expected to be completed by the fourth quarter of This announcement is dated 9 April